Thursday, September 28, 2006

Feeling The Sting Of ARM's In North Carolina

A foreclosure report from North Carolina. "A growing number of people are defaulting on their home mortgages in Guilford County, a symptom of a deeper problem with the local economy. Slow sales and falling home prices in this market are the key reason for defaults that lead to foreclosures, says one economist."

"The rising foreclosure rate is a sign that the county's economy still hasn't fully recovered from the deep recession that began five years ago. 'In a weak economy, people lose their jobs and can't make their mortgage payments,' said Don Jud, a UNCG professor emeritus who studies the economy and the housing market. 'In a rising market, that's not a problem because they just sell their houses and go somewhere else. In a weak market they can't sell their house.'"

"In some cases where prices are falling, people are not getting enough for their homes to cover the remaining amount owed. 'But if you don't have a house and you've got a job it's a great time to buy a house,' he said. 'It's really a buyer's market here.'"

"For people on the financial edge, though, these are bad times. One problem many are facing is rising interest rates on their adjustable rate mortgages, also known as ARMs. Many are betting that they'll make more money, refinance to fixed-rate mortgages or sell the house within a few years."

"An overly optimistic buyer can get into a lot of trouble fast, especially if a monthly payment rises by hundreds or thousands of dollars, said Jerry L. Wass, president of First Community Mortgage in Greensboro. Even he felt the sting of his family's adjustable rate, which rose from 3.75 percent to 8.25 percent, until he was able to refinance."

"'It was difficult for us,' he said. 'For some people, that would be enough to ruin them. That would be the tipping point.'"

"Banks, which are also facing slow business as home sales lag, are more aggressively pushing for payment, said local attorney Charles E. Neill III. 'I'm seeing more foreclosures with folks that aren't really that far behind,' he said. 'Used to be you'd see someone coming in and they're 12 months behind in their payments. More and more, we're seeing people going into foreclosure three and four months behind.'"

"Some borrowers are still their own worst enemies. Some, for example, don't really bother to do the math about how a loan would affect their spending habits. All they consider is the amount they'll qualify for, and get stuck with burdensome bills."


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